IMF Executive Board Approves US$ 163.9 Million Arrangement Under the Extended Credit Facility for the Islamic Republic of Mauritania

Mauritania's ECF-supported program aims to address the challenges of economic growth, stability, sustainability, and poverty.

Reforms will seek to create fiscal space for social spending and infrastructure through revenue mobilization and expenditure prioritization, as well as to modernize the monetary policy framework and maintain financial stability.

On December 6, 2017, the Executive Board of the International Monetary Fund (IMF) approved a three-year arrangement under the Extended Credit Facility (ECF) with Mauritania for SDR 115.92 million (about US$ 163.9 million, or 90 percent of Mauritania's quota) to support the country's economic and financial reform program.

The ECF-supported program is expected to help Mauritania economy foster inclusive and diversified growth to improve the population's living standards, maintain macroeconomic stability, strengthen debt sustainability, and reduce poverty.

An amount of SDR 16.56 million (about US$ 23.4 million) will be made available immediately to Mauritania. The remaining amount will be phased in over the duration of the program, subject to semi-annual reviews.

"Mauritania is addressing decisively the aftermath of a terms-of-trade shock that slowed growth and widened imbalances. The authorities' policy adjustment efforts succeeded in restoring macroeconomic stability and stabilizing debt levels, while growth rebounded. The authorities also prepared a long-term inclusive growth strategy, including structural reforms and infrastructure investment, to support diversification, job creation, and poverty reduction.

"The authorities' program appropriately addresses Mauritania's macroeconomic and structural challenges. The program aims to support the nascent recovery, diversify the economy, and meet infrastructure needs while maintaining macroeconomic stability, increasing resilience to shocks, and strengthening debt sustainability. It also seeks to reduce poverty, inequality and unemployment. Strong political commitment, ownership and steadfast implementation of the Fund-supported program will be needed for success.

"Building on the significant adjustment achieved, the authorities will continue with fiscal consolidation to restore debt sustainability while creating fiscal space for social and infrastructure spending through revenue mobilization, expenditure prioritization, and public investment management reforms. The authorities will advance implementation of planned tax policy and administration reforms and control current spending. Given the high public debt ratio, they will limit non-concessional borrowing and strengthen debt management to set the debt-to-GDP ratio on a clear downward trajectory.

"As part of the program, the monetary policy framework will be modernized and the central bank operational autonomy will be strengthened. A competitive foreign exchange market will be introduced to ensure regular access to foreign exchange, increase exchange rate flexibility and support growth.

"To address financial stability risks and support credit, the authorities will improve banking sector regulations and strengthen supervision. They will continue to improve the business climate and governance, and seek to expand the social safety net."

Annex

Recent Economic Developments

Mauritania, a commodity exporter, continues to face the challenge of low and volatile metal prices which slowed growth and widened imbalances. Following the sharp drop in iron ore prices in 2014–15 which halved export revenues, widened imbalances, and exposed financial vulnerabilities, the authorities cut the budget deficit significantly, allowed the exchange rate to depreciate, and mobilized foreign grants and loans. These efforts succeeded in restoring macroeconomic stability and levelling off debt to 69 percent of GDP, while growth rebounded to an estimated 1.6 percent in 2016 and 3.1 percent in 2017, and inflation remained subdued at 0.8 percent in October. In parallel, the authorities prepared an inclusive growth strategy covering 2017–30, including structural reforms and sizable foreign-financed infrastructure investment to support growth and diversification. Poverty, however, remains widespread at about 31 percent of the population, and sizeable macroeconomic imbalances and risks remain.

Program Summary

The authorities' program aims to address the challenges of growth, stability and sustainability; support the reform momentum; and catalyze external financing. To support inclusive and diversified growth while addressing remaining external imbalances and reducing vulnerabilities, the program will:

Modernize monetary policy and reform the foreign exchange market to improve access to foreign exchange and increase exchange rate flexibility, with a view to absorbing shocks and enhancing competitiveness, accompanied if needed by countercyclical monetary policy to address tight liquidity and support growth.

Create space for infrastructure investment and social spending (to support inclusive growth and diversification) while maintaining a path of gradual fiscal consolidation to strengthen the external position and debt sustainability. This will require strengthening domestic revenue mobilization and public investment and debt management to ensure prioritization.